Friday, 21 September 2007

Are We Headed for an Epic Bear Market ?

When you add it all up ... a single dollar of "real" capital supports $20 to $30 of loans. This spiral of borrowing on an increasingly thin base of real assets, writ large and in nearly infinite variety, ultimately created a world in which derivatives outstanding earlier this year stood at $485 trillion -- or eight times total global gross domestic product of $60 trillion.

This is insane. A massive part of the stock market growth in recent years has been fuelled by this funny money and now it's become a lead weight of financial doom. The current debt cannot be re-financed or paid off !! The big question is how much money can the Federal Reserve Banks of the world print to cover the losses and keep the financial markets afloat ? Not enough would be my guess ...

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